Swedish carmaker Volvo Cars is not planning to introduce plug-in hybrid electric vehicles (PHEVs) in India in the near term, citing the country's tax structure and uncertainty over customers' willingness to pay the higher prices associated with the technology.

The company remains focused on battery electric vehicles (BEVs) and mild-hybrid models but has not ruled out PHEVs if market demand and commercial considerations justify their introduction.

Speaking to media outlets on the sidelines of the launch of the EX90 electric SUV, Volvo Car India managing director Jyoti Malhotra said the current tax structure was a major barrier to introducing plug-in hybrids.

"The challenge is that Indian taxation is not conducive," he said, adding that the company was assessing whether customers would be willing to pay the additional cost of PHEVs.

Battery electric vehicles attract Goods and Services Tax (GST) at 5%, with no compensation cess, while PHEVs outside the small-car category are subject to GST at 40%, with applicable cesses taking the total tax burden to as much as 43%. The 35-percentage-point difference in GST rates favours fully electric vehicles over PHEVs.

PHEVs combine an internal combustion engine (ICE) with an electric drivetrain comprising an electric motor and an externally rechargeable battery. Having two powertrains increases vehicle costs, while the higher tax burden further raises purchase prices, potentially making PHEVs less competitive than conventional ICE vehicles and fully electric models.

Malhotra also questioned whether the third phase of Corporate Average Fuel Economy (CAFE) norms, scheduled to take effect from April 2027, would improve the commercial viability of PHEVs or influence their purchase prices.

"I don't think CAFE will bring much change to that. It is basically the tax structure," he said.

Company has not ruled out introducing PHEVs if market conditions change. "It's not that we will bring it, but we can bring it if all things fall in place," Malhotra added.

Mercedes-Benz is also considering plug-in hybrid models, while other established carmakers in India are evaluating different powertrain options, including hybrid technologies and fully electric vehicles. However, hybrids, particularly PHEVs, remain concentrated largely in the premium and luxury segments because of their higher prices.

Company's strategy remains focused on electrification, although the pace of the transition may vary according to market conditions. "Our end goal is still the same, globally as well as in India, that we want to become an electric car company," Malhotra said.

The company plans to introduce three new fully electric models in India over the next three years, following a strategy of launching one electric car annually. "Our strategy is very simple. We will bring one electric car every year," he said. Malhotra declined to disclose the powertrain mix company expects to achieve during this period but said the share of EVs in its sales should increase as new models are introduced.

Brand currently sells the EX30 and EC40 electric models in India, alongside the XC60 and XC90 SUVs with mild-hybrid powertrains. The XC60 and XC90 are also available as PHEVs in international markets. The launch of the EX90 has taken brand's fully electric line-up in India to three models.

Launched on October 12th at Rs. 12.6 million (US$ 132,720), the six-seat EX90 is built on SPA2 platform, with deliveries scheduled to begin in January 2027. The ES90 electric saloon is expected to be the company's next EV launch in India. The EX90 and ES90 are the additional electric models identified in the company's launch plans, with the ES90 expected to follow the SUV.

EVs currently account for approximately one-quarter of company's sales in India. Malhotra did not disclose the proportion of sales the company is targeting from EVs in the medium term. The existing mix of mild hybrids and fully electric vehicles also supports compliance with CAFE requirements, allowing Volvo to make future model decisions according to market demand.

Brand is also facing supply-chain challenges affecting vehicle sales and costs. Malhotra said geopolitical developments and recent disruptions had increased input and logistics costs, particularly for imported kits used to assemble vehicles in India. Higher shipping costs and longer turnaround times have made delivery schedules less predictable and affected sales. He declined to quantify the impact on sales volumes but said the disruptions had affected the company's performance.

Rising costs have also put pressure on vehicle prices. Malhotra said company had not increased prices since the first quarter of the year despite higher input and logistics costs, but indicated that a revision could be introduced during the festival season.

"For us, I think what we have seen, input costs, of course, are increasing, shipping, logistics are becoming very, very challenging. The turnaround time has increased. The cost of shipping is going up. So I think the cost increases are inevitable. We will have to pass it on to customer at some point of time," he said.

"We are getting very close to where we will be forced to pass this higher cost on to customers," Malhotra added.

Regarding sales volumes and market share, Malhotra said company was prioritising brand awareness and the customer experience in India rather than seeking to increase sales volumes or market share in the near term.